Policy Options for Food Assistance in India: Lessons from the US

The Targeted Public Distribution System (TPDS) and Antodaya Anna Yojana (AAY) are important components of India’s social safety net. Shortcomings in these food assistance programs have led to various calls for reform in recent times. As policy makers contemplate changes, lessons from the United States’ reforms of its own Food Stamp Program (FSP) may prove useful in selecting among alternative designs. For the Indian government, the most applicable aspects of the US experience with FSP reforms lies in the area of eligibility determination rules. In designing eligibility criteria for food assistance, US policy makers have struggled with a basic tradeoff. Whereas monitoring eligibility conditions frequently with precise measures of a family’s short-term resources targets food subsidies to the neediest poor, it also carries a large administrative burden for government and beneficiaries. The alternative policy of relying on easily-measured indicators of low longer-term income succeeds in minimizing administrative costs, but it fails to identify families who suffer spells of temporary poverty and can lead to substantial pay-outs to families who no longer require assistance. To assess the importance and consequences of this tradeoff in the US FSP, we evaluate findings produced by a micro-simulation framework developed in MaCurdy and Marrufo (2006a,2006b). These simulations depict the consequences of adopting alternative eligibility rules on program participation, payments of benefits, and administrative activities. The results reveal that it is possible to design eligibility regimes that achieve a reasonable balance between the competing goals of appropriate targeting and administrative efficiency. Such findings have interesting implications for the redesign of the TPDS/AAY, which at present generally relies on using imprecise measures of long-term poverty to determine eligibility.